Social innovators create a new model for inclusive growth

By Katherine Milligan*

What does it take to generate ground-breaking models that successfully tackle pressing social and environmental problems? And how can these models drive meaningful, lasting change that occurs across sectors?

These questions matter deeply. Our ability to generate new models and bring them to scale will be at the heart of the next great transformation towards more inclusive market economies.

As we cast around for guidance and inspiration, we need look no further than social enterprises. Social enterprises deliver practical solutions to social problems by turning challenges into opportunities and focusing relentlessly on innovation and resourcefulness – defining traits desperately needed in today’s economic climate.

Given the growing criticism of capitalist excess, there is another important lesson they can impart. Fulfilment of their social mission is their primary objective, with financial sustainability (or in some cases profitability) treated as a means to deliver more services to more people, not as an end in itself. This distinction – usually enshrined in a social enterprise’s by-laws – creates a completely different incentive structure. Rather than charge as much as they can and provide the least they can get away with, social enterprises charge modest or below-market rates and often openly share knowledge or collaborate with partners to expand their impact beyond the customers they can service directly.

Take Waste Concern in Bangladesh, a social enterprise that collects and recycles household and market waste in the capital city of Dhaka. Waste Concern turns the waste into organic fertilizer that is sold to rural farmers. Waste Concern increases waste pickers’ incomes and provides them with healthcare, daycare centres and free meals, although none of this is legally required. It does not charge the government tipping fees, saving the municipality of Dhaka approximately US$ 1.2 million in waste management every year. (Oh, and by the way, Waste Concern is well on its way to removing 90,000 tons of carbon emissions from the atmosphere per year; and, with the help of the Gates Foundation and the UN ESCAP, it is transferring its know-how to local partners in 20 cities throughout Asia and Africa.

Creating jobs and improving crop yields; reducing carbon emissions and public expenditures: how many models can claim to do that?

We tend to think of social enterprises as “nice little stories”, not as cutting edge. But the reality is that they are charting the way towards a more equitable, prosperous and productive society. And just as the social entrepreneurs are busy innovating new models, so too are the capital providers that support them on their path to working on a bigger scale.

The Shell Foundation, for example, has evolved from the role of traditional grant-maker to angel investor, taking big risks and investing in start-up social ventures that, regardless of whether they are for-profit or non-profit, embrace a business approach to social change.

Another example, from the United Kingdom, is one of the boldest additions to the scene. Big Society Capital was created by the UK government as a wholesale social investment bank that leverages dormant capital as well as private capital and experiments with new instruments such as social impact bonds.

Or take Acumen Fund, a non-profit global venture fund. It has invested US$ 70 million of investors’ capital in 60 social ventures around the world that are inventing viable business models to bring clean water to poor people, improve crop yields of African farmers, and much more. Acumen’s approach of directing private capital to generate an outsized social return has helped to shape an entire industry of impact investing.

What all of these models share is that they break free from the “rules of the game” that exist in their particular industry or sector – exactly the kind of thinking we need most today. Over the coming days, the Global Agenda Council on Social Innovation will feature a special blog series on Social Innovation at an Inflection Point. This reflects the Council’s view that the time is ripe to move beyond awareness-raising and hero worship to action in developing the sector’s full potential.

Council Chair Johanna Mair, Professor at Stanford University and Academic Editor of the Stanford Social Innovation Review, will start the series by exploring the promise and perils of impact investing. Council Member Nick O’Donohoe, Chief Executive Officer of Big Society Capital in the UK, will make the case for government leadership and elaborate a policy agenda to scale the sector. And, fresh from the Social Business Initiative conference hosted by the European Commission on 17 November, Mirjam Schöning, Senior Director and Head of the Schwab Foundation for Social Entrepreneurship, will share the view from Brussels and explain why the EU initiative has global implications.

Please join this important conversation.

*Katherine Milligan is a Director at the Schwab Foundation for Social Entrepreneurship and Manager of the Global Agenda Council on Social Innovation.